This could be because you have rails 3 installed but are trying to run a rails 2.3.4 app. I've had this problem before and the solution was to remove rails 3 because this dependency is one of rails 3, not 2.3.4

I know there's already an answer for this, but when I was running an older rails, I specified script/server webrick after having the same problem and this worked. This may not be ideal for production, however, and I recommend upgrading as mentioned in the other answer.